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Monday, October 29, 2012

Top 6 Rules for Retirement Investing

Planning
for your retirement is very important. It might mean the difference between
living from hand to mouth and living comfortably when the time for retirement
comes. As with most things in life, there are factors that are under your
control when you are saving for your retirement fund. Knowing what these
factors are and what rules to play by when investing for retirement, will go a
long way in helping you attain your goal. The following are the most important
rules to follow, while planning for retirement investing.

Prepare
Early Enough

Most
people make the mistake of waiting until the last minute before they start
investing for retirement. Don’t go down this road; start by saving for your
retirement fund early enough. Remember that the three most important factors
that will impact on your investment are the rate of return, time and the amount
you have invested. This therefore means that time is of utmost importance when
you are investing. Even if this means taking unsecured loans to meet your goals,
go for them early enough.

Have
Different Investment Portfolios

Ever
heard of the saying “don’t put all your eggs in one basket?” This also holds
true for your retirement investment. By having different portfolios, you will
be able to achieve the various financial goals that you are aiming for. For
example, you can have a portfolio for your child’s education, one for medical
care and another one for your retirement. Because of the time factor, you will
find how much cash you devote to a certain portfolio can change as time goes
on.

Use the
Compounding Effect to Your Advantage

The
compounding effect comes into play when you take the returns of your retirement
investment and re-invest back. You should therefore make it a priority to
re-invest all the interest you have earned throughout the year back to your retirement
investing account so as to earn more interest the year after. It is simply
unbelievable how this re-invested cash grows in leaps and bounds over a certain
period of time.

Diversify
Your Retirement Investment

The
purpose of diversifying your retirement portfolio is to spread the risk. Take
note that a good investment is one, which is not affected much by market
volatility. After all, if your investment is so sensitive to supply and demand
swings, you might wake up one day and realize that all your savings have been
wiped away. Diversifying, therefore, helps you to avoid such pitfalls and
ensures that your portfolios are stable from the market dynamics.

Keep
Emotions Out Of Your Investment

It
is human nature to become overconfident when things are going fine and panic
when things go wrong. This is simply not the best way to run a retirement
investment. Suppose you have taken unsecured loans and
invested into the stock market. Should the market crash and you panic, you are
bound to sell your shares at a dirt-cheap price and lose a lot. However, should
you stay calm during this time and wait until the stock market goes up again,
you will have saved your investment from losing value and may even have a
better chance to make a killing.

Seek
Financial Help

A lot of people fear to seek information from
experts even when they don’t know what to do. By talking to a financial expert
about your plans, you will get insight on which areas to invest and which ones
to avoid. Also, you will learn a lot about investment fundamentals and how to
invest wisely. For example, you might have thought of taking unsecured loans to
finance your home but get to know that the best thing is to invest this money
in the stock market where it will grow and bring you interest.